Cellcom Statement Analysis

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Table of Contents

Executive Summary.Page 3Company Analysis...Page 3-7

Analysis of the Cellular Market and Fixed Telephony Industry

Cellcom Israel Ltd. Description

Principal Competitor: Partner Communications Company Ltd.

SWOT Analysis of Cellcom Israel Ltd.

Cellcoms Strategy and FutureAnalyzing the Financial Statements and comparison.Page 7-11

Common sized Income Statement

Common Sized Balance SheetFinancial Ratio Analysis.Page 12-15

Liquidity Ratios

Profitability Ratios

Capital Structure Ratios

Working Capital Activity

Risk Analysis...Page 16-17 Credit Risk Analysis

Bankruptcy AnalysisCompany Valuation.Page 18-19

WACC Calculation

Based on P/E

DCF CalculationConclusion...Page 19Bibliography....Page 20Appendixes..Page 21-29


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Executive Summary

Cellcom LTD is an Israeli based telecommunication company that focuses on the cellular market and thelandline market.We have analyzed and interpreted Cellcom financial reports in order to evaluate the firm and recommendwhether the company's stock should be bought, sold, or held.

We recommend buying Cellcom's stock.

By analyzing the Israeli telecommunication market, we notice that Cellcom has a strong stature in it andis the biggest cellular firm in the country. Moreover, Cellcom has identified the changes the market isgoing through and is aimed toward adapting for them. Cellcom has understood that the future lies notonly in hardware selling and airtime revenues, but in value-added services.We notice growth in Cellcom's revenues and net income. Nevertheless, our financial ratios analysisindicates high performance and stability that result in constant but safe growth.We have also analyzed Cellcom's main competitor, Partner, and found its stature to have a negativeoutlook.By calculating and evaluating the company's value by the P/E method and the DCF model we found thatthe stock is undervalued hence we recommend purchasing it.

Company Analysis

Analysis of the Cellular Market and Fixed Telephony Industry1234

The cellular market and fixed telephony industry (hereinafter: "the telecom market", or "the market") ofIsrael is the most developed one in the Middle East, although not the biggest one. As a natural evolutionof telecom, the market in Israel emerged from the national postal services/company (in Israel: "Israel

Postal Company"). This service replaced the British service in 1948 as a sub-unit in the Postal ministry

office, later renamed as the ministry of communication. Up to 1984, every fixed line subscriber wasinstalled by the ministry itself. In 1984, Bezeq (the 1st PSTN5 company in Israel; the 2nd is HOT) wasestablished as a government owned company in charge of the national fixed line telecommunicationnetwork. In 1986 the first cellular phone company was established (Pelephone- owned by Bezeq- now a

publicly held company). Other Cellular phone companies were established: Cellcom (94') Partner/Orange(99') and MIRS (connected to the PSTN in 98'). In duration of almost nine years, Pelephone was the onlycellular phone company in Israel. During that period, penetration rates were limited as a cellular phonewas marketed for business men and not for the entire public due to high costs. After the entrance ofCellcom, these rates started growing exponentially as the latter promised to offer their services withrelatively low prices. After the entrance and emergence of Partner to the cellular market, they have seizeda great deal of the market and currently hold the secnond place. The distribution of subscribers among

operators is estimated as follows: Cellcom 34.5%, Partner 32%, Pelephone 29% and Mirs 4.3%.2012 is thought by many to be a revolutionary year in the cellular market: MIRS will reestablish their

network as a modern one, Golan Telecom will establish a new network and several MVNO 6 providers

1http://he.wikipedia.org/wiki/%D7%AA%D7%A7%D7%A9%D7%95%D7%A8%D7%AA_%D7%91%D7%99%D7%A9%D7%A8%D7%90%D7%9C

220-F Cellcom 2010 Edgar

3http://www.moc.gov.il/191-he/MOC.aspx

4http://www.ynet.co.il/articles/0,7340,L-4151913,00.html

5PSTN- Public Switched Telephone Network

6A mobile virtual network operator (MVNO) is a company that provides mobile phone services but does not have its own licensed frequencyallocation of radio spectrum, nor does it necessarily have all of the infrastructure required to provide mobile telephone service
http://he.wikipedia.org/wiki/%D7%AA%D7%A7%D7%A9%D7%95%D7%A8%D7%AA_%D7%91%D7%99%D7%A9%D7%A8%D7%90%D7%9Chttp://he.wikipedia.org/wiki/%D7%AA%D7%A7%D7%A9%D7%95%D7%A8%D7%AA_%D7%91%D7%99%D7%A9%D7%A8%D7%90%D7%9Chttp://he.wikipedia.org/wiki/%D7%AA%D7%A7%D7%A9%D7%95%D7%A8%D7%AA_%D7%91%D7%99%D7%A9%D7%A8%D7%90%D7%9Chttp://www.moc.gov.il/191-he/MOC.aspxhttp://www.moc.gov.il/191-he/MOC.aspxhttp://www.moc.gov.il/191-he/MOC.aspxhttp://www.moc.gov.il/191-he/MOC.aspxhttp://www.ynet.co.il/articles/0,7340,L-4151913,00.htmlhttp://www.ynet.co.il/articles/0,7340,L-4151913,00.htmlhttp://www.ynet.co.il/articles/0,7340,L-4151913,00.htmlhttp://www.ynet.co.il/articles/0,7340,L-4151913,00.htmlhttp://www.ynet.co.il/articles/0,7340,L-4151913,00.htmlhttp://www.ynet.co.il/articles/0,7340,L-4151913,00.htmlhttp://www.moc.gov.il/191-he/MOC.aspxhttp://www.moc.gov.il/191-he/MOC.aspxhttp://he.wikipedia.org/wiki/%D7%AA%D7%A7%D7%A9%D7%95%D7%A8%D7%AA_%D7%91%D7%99%D7%A9%D7%A8%D7%90%D7%9C


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(Rami Levi, Alon Cellular, Home Center and more7), will enter the market by leasing traffic capacityfrom the existing operators. This change will increase the fierceness of the market. The cellular phonemarket is growing marginally in the last 5 years, as the total percentage of subscribers is higher than thenumber of citizens (hence over 100%- in 2010 the cellular penetration rate was 128% as opposed to 127%in 2009). The cellular companies count on the population growth in Israel to keep the market growth ratesrising.

Trends in the cellular IndustryThere are several trends in the industry: financial, technological and social. The revenue generators(which will be elaborated further on) are shifting from air-time and SMS charges towards value-addedservices that are enabled from the technological innovations, especially smartphones. These services, suchas content and internet services are highly consumed by subscribers whereas the traditional uses ofcellular phones can be used ("Viber") freely by iPhone and by all cellular phones in the future. Finally,the Israeli social protests in 2011 along with strong legislative actions by the minister of communicationsshifted the focus towards the client, who was suffering from the services and rates given by the existingcompanies. It is considered that the entrance of the new providers and operators will create a "buyermarket" as opposed to the "seller market" that existed until now.

Cellcom Israel LTD. Description8 9

Cellcom is an Israeli based and publicly held10 Telecommunication Company that was founded in 1994.The vast majority of Cellcom's business is focused on wireless services and is their top revenue generator.Cellcom was the first to market mobile phones with Hebrew language menus. Cellcom holds most of themobile phone subscribers amongst the other three providers, controlling over one third of the market (3.4million subscribers- 700k of which are Arab-Israelis11). Cellcom's voice network is based on the modernGSM protocol, as data services are based on several other technologies. Cellcom is the pioneer in manytechnological fields in the mobile phone market: the first to launch the video calls and the first to launch a3.5G network and services. Cellcom provides value-added and landline services based on an independentfiber-optic network. Although wireless/mobile services are the top revenues generator (64.1%), their

portion in the company's revenues is diminishing (a 2.5% decrease from 2009) whereas landline andvalue-added services percentage of revenues is increasing.

Principal Competitor: Partner1213

Partner Communications Company LTD. Is a mobile network operator, Internet Wi-Fi and fixedtelephony service provider. Partner is publicly traded14. Although entering the market third and a fewyears after Cellcom did, Partner penetrated the market and swift a great deal of subscribers. Althoughranked second among the subscribers, Partner holds the biggest amount of 3G subscribers. Partner usesthe international brand name "Orange" although the French owners of the brand are not stake-holders inPartner.

7All MVNO operators: Free Telecom LTD, Ituran cellular communications LTD, Rami Levi Shivk Hashikma LTD, Binat Semech (outsourcing) LTD, T2T

telecommunications LTD., Home cellular LTD., Alon Cellular LTD and Gali Phone LTD.

8http://en.wikipedia.org/wiki/Cellcom_(Israel)

9http://www.Cellcom.co.il/Pages/default.aspx

10Dual listedtraded both on TASE and NASDAQ

11The biggest cellular penetration among Arab-Israeli people

12Partner SEC 20-F report

13http://en.wikipedia.org/wiki/Partner_Communications_Company

14Dual listedtraded both on TASE and NASDAQ
http://en.wikipedia.org/wiki/Cellcom_(Israel)http://en.wikipedia.org/wiki/Cellcom_(Israel)http://en.wikipedia.org/wiki/Cellcom_(Israel)http://en.wikipedia.org/wiki/Cellcom_(Israel)http://www.cellcom.co.il/Pages/default.aspxhttp://www.cellcom.co.il/Pages/default.aspxhttp://www.cellcom.co.il/Pages/default.aspxhttp://www.cellcom.co.il/Pages/default.aspxhttp://en.wikipedia.org/wiki/Partner_Communications_Companyhttp://en.wikipedia.org/wiki/Partner_Communications_Companyhttp://en.wikipedia.org/wiki/Partner_Communications_Companyhttp://en.wikipedia.org/wiki/Partner_Communications_Companyhttp://en.wikipedia.org/wiki/Partner_Communications_Companyhttp://en.wikipedia.org/wiki/Partner_Communications_Companyhttp://www.cellcom.co.il/Pages/default.aspxhttp://www.cellcom.co.il/Pages/default.aspxhttp://en.wikipedia.org/wiki/Cellcom_(Israel)http://en.wikipedia.org/wiki/Cellcom_(Israel)


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SWOT Analysis of Cellcom Israel Ltd.

StrengthCombination of leading market position and strong operational results. In 2010, Cellcommaintained our market-leading position, as reflected in our subscriber base, revenues from services,EBITDA, EBITDA margin and net income, leveraging a series of brand, customer service and contentinitiatives, as well as -cost efficiencies initiatives regarding essential operational processes within thecompany.

Strong and distinctive own brand. Cellcom established brand enjoys strong recognition in Israel.They consider the enhancement of their image among consumers a top priority and continue to investsubstantial resources to maintain Cellcom as a local cellular company with a warm personal touch.Focus on music and music-related content services, under one marketing umbrella -"Cellcom Media".Web Site. Cellcom's web site has the highest number of entrances to its web site compared to theother companies.15

Conservative policy in managing Liquidity and financial risks.

Transmission infrastructure and landline services. Cellcom have an advanced fiber-optictransmission infrastructure that consists ofapproximately 1,570 kilometers of inland fiber-optic cable,which, together with complementary microwave-based infrastructure, connects the majority of cellsites and provides for substantially all of backhaul services.Strategic relationship with one of Israels leading business groups. Cellcom's ultimate parentcompany, IDB, is one of the largest business groups in Israel. They enjoy access, through themanagement services agreement, to the senior management of the IDB group, who are some of themost experienced managers in Israel. These managers, including veterans of the Israelitelecommunications market, provide Cellcom with financial, managerial and strategic guidance.Strong management team. Cellcom management team includes seasoned managers with significantexperience and solid track records in previous managerial positions. Chairman, Mr. Ami Erel, is aveteran of the Israeli communications market and previously served as the chief executive officer ofBezeq. Chief executive officer, Mr. Amos Shapira, has been chief executive officer of Kimberly-Clarks Israeli subsidiary and of El Al Israel Airlines.

Weakness

Risks relating to Cellcom Ordinary Shares. A substantial number of the ordinary shares could besold into the public market, which could depress the share price. Cellcom's largest shareholder, DIC,holds approximately 48.3% of the outstanding ordinary shares, as of December 31, 2010. The market

price of our ordinary shares could decline as a result of future sales into the3rd Generation. Cellcom holds the smallest number of clients of the 3rd generation phonescompared all the other companies. Out of 3.2M only 941 using 3G.16

Dividends. Track recorded of aggressive dividends policy by which SH gets almost 100% of netprofits.17

Increasing competitive pressures.

Opportunity

The new iPhone market will enable growth.Partner's management has caused their company to decline. This gives an opportunity to Cellcom toobtain more market share.

15Appendix1

16Appendix2

17Appendix3


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Cellcom's acquisition of Netvision. This action will enhance the company's to successfully competein the rapidly changing Israeli market. Where the company's biggest competitor are also un the frocessof forming major telecommunication groups.

Threats

New Government Regulations. Up until now there were 3 dominant companies in the Israeli

cellular market. Israel now has a new minister in the office of communication, Mr. Moshe Kachlon,who promised the Israeli nation to be on the consumers side and to initiate a nuclear war against

the Israeli cellular cartel. The new regulations include: 1. Fees for networks links are CANCELLED2. Fees on contract termination are CANCELLED 3. Increase of competition by allowing 2 newcompanies MVNO to join the market - Golan Telecom & Mirs (aka HOT) & Rami Levi Comm. 4.Regulations on Smartphone sales: The Israeli cellular cartel is selling smartphones for outrageous

prices (double and sometimes triple the price, compared to Amazon, Ebay or any private outlet. All ofthat is about to be revolutionized as a new regulation which is named in Hebrew Nitook Zika isgaining more public awareness through Facebook groups with the medias support. According to this

new regulation, a consumer can now buy his brand new smartphone anywhere he/she wishes for halfthe price of the cartels retail price.

Interconnected rates reduction (since 2011)Business results may be affected by continued recession. If this recession reoccurs, usage of ourservices decreases and we cannot otherwise compensate for lost revenues, it may have a materialadverse effect on our results of operations, financial condition or prospects. If the number ofcustomers that are unable to pay their bills increases or one or more of our larger business customersfails to pay the amount owed to us, it may materially increase our bad debts and have a materialadverse effect on our results of operations and financial condition. Furthermore, the recession mayadversely affect third parties we rely upon in the provision of our services, including interconnectingtelecommunication providers, roaming Partners and services and equipment providers.Partner's acquisition of 012.The result of these kinds of mergers is the formation oftelecommunications groups which are able to offer bundled mobile and fixed line services. Smile is

the main competitor of NetVision and is active in the same market segments.Mobility devices, customers can move to another operator without changing their original number. The new iPhone market could disable growth due to that all companies hold it.

Cellcoms Strategy and FutureCellcom's goal is to strengthen their position as the leading cellular provider in Israel. The principalelements for the business strategy are:

Focus on core business and synergetic complementary business. remain focused on the primary source

of business, mobile communications and value added services over the advanced cellular network, whilecontinuing to develop new complementary business, which we identify to be both cost synergetic to thecore business and provide direct contribution to the business, such as the landline services to the businesscommunity, provided over our fiber-optic cables and microwave links and certain financial servicesrecently launched, available to subscribers of all Israeli cellular operators. Cellcom believe that tosteadfast focus on the core competencies is one of the main factors for the market leading position.Moreover, Cellcom wants to maximize customer satisfaction, retention and growth. The growthstrategy is focused on retaining subscribers, expanding the selection of services and products offered tosubscribers and tailoring offers to customers' needs, in order to enhance customer satisfaction andincrease average revenues per user. Cellcom strive to be proactive at every service interaction with itscustomers, to offer a service which is as clear, simple and methodical as possible and to continually

improve and enhance the flexibility of customer service. In addition Cellcom wants to Grow and developits Internet, content and data services. The usage of cellular content and data services in Israel is


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currently relatively low compared to western European countries, attributed to Israel launching 3Gservices two years after its European peers. Cellcom launched the UMTS network in 2006, over a yearafter the competitors. Since then they experienced a significant growth in content and value addedservices. However Cellcom expect the recent and expected regulatory changes to burden the ability tofulfill the growth potential of the content and data services. As of December 31, 2010 approximately 1.14million of subscribers are 3G subscribers, mostly post paid. In 2010 Cellcom launched their CarrierEthernet network allowing the provision of data services at high speed and capacity. Cellcom also plan to

utilize the momentum in the arena of Israeli content to expand content and data services, products andcapabilities through in-house expertise and strategic relationships with leading cellular content providers,with special emphasis on original Israeli culture and usage enhancing content and applications in thecellular and complementary media. In 2009 they have launched Cellcom Media initiative, following ourCellcom Volume music-related initiative, featuring, among other things, the cellular music store,original content including drama series and on-net-reality programs, video games, social networksapplications. The launch of "Cellcom Media" follows the success of Cellcom Volume music-relatedinitiative that contributed positively to our revenues, brand identity and popularity amongst users ingeneral and youth in particular. They also continued marketing our data-enhancing products, including acellular modem and cellular router.In the future Cellcom is planning to further develop and strengthen the Cellcom brand. Externalmarket surveys that have commissioned indicate that brand recognition is an important factor insubscriber selection of, and loyalty to, a cellular operator. Due to extensive efforts in the past few years,they believe that they have established the Cellcom brand as one of the most recognized and respectedconsumer brands in Israel. They plan to continually enhance the brand through maintaining high networkquality, the provision of innovative products and services, quality customer service and investments inadvertising and promotional campaigns. They believe these enhancements are key to maintaining acompetitive advantage, differentiating their services from their competitors and establishing andmaintaining a successful relationship with the subscribers. All this will be done side by side withOptimizing cost structure. Cellcom intend to continue its efforts to control costs and improve efficiencywhile also improving the quality of our services.

Analyzing the Financial Statements and comparison

Cellcom - Common Size I/S

Year Ended December 31, 2008 2009 2010

Revenues % 100.00%6,417,000,000

52.90%47.10%10.90%

10.30%

-0.40%26.30%4.80%21.50%6.10%15.40%

100.00%6,483,000,000

51.40%48.60%11.00%10.20%

0.10%27.30%3.40%23.90%5.70%18.20%

100.00%6,662,000,000

49.90%50.10%11.30%9.60%

0.10%29.10%3.50%25.60%6.20%19.40%

Revenues NIS

Cost of revenues

Gross profit

Selling and marketing expenses

General and administrative expenses

Other (income) expenses, netOperating income

Financing expenses, net

Income before income tax (EBIT)

Income tax

Net income

Our first observation is that there is a constant increase in the Companys revenues from 2008 to 2010(between 2008-2009 7.79% increase and between 2009-2010 2.76%) although this increase isdiminishing. The increase in revenues in 2009 was mainly due to a 31% increase in revenues from

content and value added services (including SMS), as well as a significant increase in revenues fromlandline services. The increase in revenues was partially offset by a substantial decrease in roaming


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revenues following the reduction in incoming and outgoing tourism resulting from the global economicslowdown. The increase in revenues was also offset in part by a decrease in revenues from domestic voiceservices mainly due to the ongoing airtime price erosion. The increase in revenues in 2010 was mainlydue to a 26% increase in revenues from content and value added services (including SMS), an increase inrevenues from landline services as well as an increase in roaming revenues. The increase in revenues hasalso resulted from a 6.8% increase in handset and accessories revenues. These increases were partiallyoffset by a decrease in revenues from domestic voice services, mainly due to the ongoing airtime price

erosion, and by a one-time provision for a refund to all our subscribers in a total amount of approximatelyNIS 66 million ($19 million) related to a major network malfunction we experienced in December 2010.The reason that we inserted the actual figure for the Net Income is there was an incredible increase

between 2008 and 2009.

Net Income

Y.E December 31, Change

Net income (M) 2008 2009 20101,291

2009 vs. 200819.50%

2010 vs. 20099.20%(In NIS millions) 989 1,182

The increase in net income in 2010 compared with 2009, was primarily due to an increase of 2.8% inrevenues, while total operating expenses increased by only 0.2%, leading to an increase of 9.6 % inoperating income. This increase was partially offset by an increase in financing expenses and income tax.The increase in net income in 2009 compared with 2008, was primarily due to an increase of 1% inrevenues, while total operating expenses decreased by 1%, leading to an increase of 4.6% in operatingincome. The increase also resulted from a decrease in financing expenses and income tax.

EBITDA MarginAlthough the EBITDA margin is (in our opinion) overrated by analysts, we still believe that it hassignificance when analyzing the cellular market as they suffer from high values of amortization and

depreciation due to the nature of their business.In 2010 there was improved profitability. Illustrated by two key margins:EBITDA margin was 40.03% (an indicator for the core profitability of the firm). This is as although bothEBITDA and revenues have been increasing the growth EBITDA has been greater than the growth inrevenues leading to an increasing EBITDA margin.

EBITDA Margin = EBITDA/Revenues 2008 2009 2010

EBITDA (in millions of NIS) 2,482 2,529 2,667Revenues (in millions of NIS) 6,417 6,483 6,662EBITDA/Revenues 38.67% 39.00% 40.03%

Operating margin was 29.09% (a measurement of what proportion of revenue is left over after payingvariable costs of production - a healthy margin indicates the ability to pay for fixed costs). We can seethat both operating income and revenues have been increasing for the past years; however, the growth inoperating income has been greater leading to an increasing operating margin.

Operating Margin (Operating income/Revenues) 2008 2009 2010

Operating income (in millions of NIS) 1,690 1,768 1,938Revenues (in millions of NIS) 6,417 6,483 6,662Operating income/Revenues 26.33% 27.27% 29.09%


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Partner - Common Size I/S


Revenues 100.00%6,302,000,000

100.00%6,079,000,000

100.00%6,674,000,000

Cost of Revenues 61.38% 62.02% 61.33%Gross Profit 38.62% 37.98% 38.67%

Selling and Marketing Expense 6.16% 6.37% 7.18%General and Administrative expenses 4.51% 4.77% 4.58%Other incomenet 1.02% 1.14% 0.96%Operating Profit 28.97% 27.98% 27.87%Finance income 0.48% 0.46% 0.42%Finance expenses 3.40% 3.36% 3.13%Finance costs, net 2.92% 2.90% 2.71%Profit before income tax (EBIT) 26.06% 25.09% 25.16%Income tax expenses 7.05% 6.32% 6.53%Profit for the year 19.01% 18.77% 18.62%

We can observe here a fluctuating amount of Revenues. There is a significant increase in revenues of8.9% between 20102009 after a drop in revenues of 3.66%. Perhaps this can be explained by the newsmartphones that were introduced in 2010.

Net Income

Y.E December 31, Change

Net income (M) 2008 2009 20101,243

2009 vs. 2008-4.99%

2010 vs. 20098.2%(In NIS millions) 1,198 1,141

The fluctuation in net income is mainly explained by the fluctuation in revenues when other expensesstayed similar over the years.

EBITDA MarginEBITDA Margin = EBITDA/Revenues 2008 2009 2010

EBITDA (in millions of NIS) 2,298 2,304 2,570

Revenues (in millions of NIS) 6,302 6,079 6,674EBITDA/Revenues 36.46% 37.90% 38.50%

Operating Margin (Operating income/Revenues) 2008 2009 2010

Operating income (in millions of NIS) 1,826 1,701 1,860Revenues (in millions of NIS) 6,302 6,079 6,674Operating income/Revenues 28.97% 27.98% 27.86%

We can see that EBITDA has been decreasing as Operating Margin is increasing over the past few years.This may be an accounting trick in order as the EBITDA is a measure of profitability; when taken alone itshows that the profitability of Partner has been increasing. However, when taking into account anadditional profitability measure (Operating Margin) we can see that this conclusion is strange. EBITDA is

probably easier to manipulate with accounting tools as its parts are more susceptible to assumptions (whatamount goes into interest, what is taxed, what and how our items are depreciated etc.).


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Cellcom - Common Size Balance Sheet


Assets

Cash and cash equivalents 5.01% 14.16% 8.89%Current investments, including derivatives 1.24% 4.26% 6.74%Trade receivables 26.93% 24.75% 24.65%Other receivables 0.80% 0.99% 1.07%

Inventory 2.17% 2.34% 1.73%Total current assets 36.15% 46.50% 43.08%Trade and other receivables 10.97% 9.50% 9.96%Property, plant and equipment, net 39.34% 32.86% 34.41%Intangible assets, net 13.54% 11.15% 12.56%Total non- current assets 63.85% 53.50% 56.92%Total assets 100.00%

5,488,000,000100.00%6,379,000,000

100.00%5,996,000,000

Liabilities

Short term borrowings 5.99% 5.49% 5.80%Trade payables and accrued expenses 12.34% 12.64% 11.94%Current tax liabilities 1.55% 1.05% 2.20%

Provisions 0.86% 1.32% 1.40%Other current liabilities, including derivatives 7.02% 6.35% 6.32%Total current liabilities 27.75% 26.84% 27.67%Debentures 61.97% 65.61% 65.26%Provisions 0.31% 0.25% 0.28%Other long-term liabilities 0.02% 0.02% 0.02%Deferred taxes 2.84% 1.43% 1.08%Total non- current liabilities 65.14% 67.30% 66.64%Total liabilities 92.89% 94.14% 94.31%Shareholders' equity

Share capital 0.02% 0.02% 0.02%Cash flow hedge reserve -0.20% -0.36% -0.35%Retained earnings 7.29% 6.21% 6.02%Total shareholders' equity 7.11% 5.86% 5.69%Total liabilities and shareholders' equity 100.00% 100.00% 100.00%

Red flags: Looking at the common size balance sheet we can immediately see that Cellcom heldsignificantly more cash in 2009 than in 2008 and 2010. There are two main reasons for this: 1) Higher netincome that resulted in higher ending cash balance and 2) lower Trade receivables and selling off PP&E(also lower) that both contributed to cash and cash equivalents 3) these fluctuations can also indicate alack of consistency in company policy. We can see a downward rate change of almost 1% in inventoryholdings of total assets. This tells us the way that the company values its inventory or, on the other hand,that the company's policy of revenue generators is shifting slowly to other directions such as theaforementioned value-added services on the account of hardware. We notice a downward rate change inreceivables which is a good sign that the company is collecting more owed money.

Partner - Common Size Balance Sheet

2008 2009 2010

Assets

Cash and cash equivalents 3.56% 5.85% 5.70%Current investments, including derivatives 0.00% 0.25% 0.11%

Trade receivables 21.36% 22.67% 23.65%Other receivables 0.64% 0.55% 1.26%Inventory 2.42% 2.81% 1.79%Derivative financial instruments 0.52% 0.00% 0.00%Total current assets 28.50% 32.14% 32.52%


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Trade and other receivables 8.07% 8.43% 11.23%Advance payment in respect of the acquisition

of 012 smile

0.00% 0.00% 0.53%

Property, plant and equipment, net 37.46% 36.71% 36.57%Intangible assets, net 24.39% 22.41% 19.14%Deferred income tax asset 1.57% 0.25% 0.00%Derivative financial instruments 0.00% 0.07% 0.00%

Total non- current assets 71.50% 67.86% 67.48%Total assets 100.00%5,165,000,000

100.00%5,623,000,000

100.00%5,627,000,

000Current Liabilities

Current maturities of notes payable and other liabilities and

current borrowings

11.00% 13.37% 11.16%

Trade payables 15.86% 13.82% 13.70%Parent grouptrade 0.08% 0.60% 1.28%Other payables 4.76% 4.23% 4.69%Deferred revenue 0.93% 1.00% 0.91%Provisions 0.00% 0.60% 0.46%

Derivative financial instruments 0.14% 0.07% 0.05%Income tax liability 0.81% 0.36% 0.20%

33.57% 34.06% 32.45%NON CURRENT LIABILITIES

Notes payable 31.23% 24.52% 32.63%Bank borrowings 0.00% 5.34% 22.25%Liability for employee rights upon retirement, net 1.03% 0.68% 0.96%Dismantling and restoring sites obligation 0.45% 0.41% 0.41%Other non-current liabilities 0.19% 0.11% 0.14%Deferred income tax liability 0.00% 0.00% 0.04%

32.89% 31.05% 56.42%TOTAL LIABILITIES 66.47% 65.11% 88.88%

EQUITYShare capital - ordinary shares of NIS 0.01

par value: authorized - December 31, 2009,

and 2010 - 235,000,000 shares; issued and

outstanding -

December 31, 2009*154,440,136 shares

December 31, 2010*155,249,176 shares 0.04% 0.04% 0.04%Capital surplus 47.36% 44.16% 19.53%Accumulated deficit -7.07% -3.06% -2.20%Treasury shares, at cost - December 31, 2009

and 2010 - 4,467,990 shares -6.80% -6.24% -6.24%TOTAL EQUITY 33.53% 34.89% 11.12%TOTAL LIABILITIES AND EQUITY 100.00% 100.00% 100.00%

Red Flags: We can see a jump in cash from 2008 to 2009. We can see no significant changes in the assetsto explain this jump. However, looking at the liabilities we immediately notice a jump in bank borrowingfrom 2008 (0%) to 2009 (5.34%/NIS 305,328,900). More alarmingly is the leap in bank borrowing from2009 (5.34%/NIS 305,328,900) to 2010 (22.25%/NIS 1,252,007,500). Over the same period (2009 2010) we also note a significant decrease in capital surplus an alarming sign of underperforming. Thiscan be explained by the changing of both the CEO and CFO in 2011 when the 2010 20-f is filed. Aslearnt in class the CEO wants to show increased profitability (also known as "taking a bath"), working incohesion with the CFO dumping all of the bank loans in the year they arrive and then paying them back in

order to increase capital surplus (spare cash) will be seen as a success in their job.


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Financial ratio Analysis

Liquidity ratios

Current ratio 2008 2009 2010

Cellcom 1.3027 1.7325 1.5570Partner .08489 0.9436 1.0022

Comparing Cellcom and Partners current ratios, we can note that Cellcoms ratios are much higher. The

ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities with itsshort-term assets. The higher the current ratio, the more capable the company is for paying its obligations.A current ratio around 1 means that, on average, for one dollar in asset there is one dollar for liability.Therefore, we can say that Cellcom is overly healthy and, barring 2008, Partner is healthy. This is asCellcom is holding too much current assets with respect to their liabilities.

Quick ratio 2008 2009 2010

Cellcom 1.2246 1.6454 1.4942Partner 0.7768 0.8610 0.9468

Quick ratio is an indicator of the Company's short-term liquidity. The quick ratio measures a company'sability to meet its short-term obligations with its most liquid assets. As a rule of thumb: the higher thequick ratio, the better the position of the company. The quick ratio is more conservative than the currentratio, a more well-known liquidity measure, because it excludes inventory from current assets. Inventoryis excluded because some companies have difficulty turning their inventory into cash. In the event thatshort-term obligations need to be paid off immediately, there are situations in which the current ratiowould overestimate a company's short-term financial strength18. Cellcom, for every dollar of liabilities,has more than one dollar of liquid assets. This was amplified in 2009 by the unusual amount of cash held

by the Company. Partner has a ratio of below one for 2008, 2009 and 2010; in order to meet the debtobligations Partner will probably have to collect on some accounts receivable or sell some assets (such asinventory).

OCF to Sales 2008 2009 2010Cellcom 32.58% 33.34% 33.77%

Partner 29.41% 31.58% 31.97%

This ratio, which is expressed as a percentage, compares a company's operating cash flow to its net salesor revenues, which gives investors an idea of the company's ability to turn sales into cash 19. We can seeinstantly from this ratio that Cellcom earns more operating cash flow for every dollar of sales that Partnerfor the past years. Cellcom earns on average approximately 33 agurot for every sales shekel and Partnerearns on average approximately 31 agurot for every sales shekel.

AnalysisBoth companies appear to be healthy, from a liquidity point of view. Cellcom is in a better condition

since it has a better ability to create cash and liquidity. However, this may be to an excess in Cellcomscase. Partner has been struggling in the past couple of years but seems to have fixed their cash andliquidity troubles.

18http://www.investopedia.com/terms/q/quickratio.asp#axzz1eK4bDAWv

19 http://www.investopedia.com/university/ratios/cash-flow-indicator/ratio1.asp#axzz1eK4bDAWv


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Profitability Ratios

Profit margin 2008 2009 2010

Cellcom 15.41% 18.23% 19.37%Partner 19.00% 18.76% 18.62%

A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. Itmeasures how much out of every dollar of sales a company actually keeps in earnings 20. We can see that,on average, Partner has a higher (18.80%) profit margin that Cellcom (17.67%). However, looking at the

data critically we can see that Cellcoms profit margin has been increasing whereas Partners has beendecreasing. This may be explained by the change of both CEO and CFO and we will need to compare theresults to the consolidated financial statements of 2011 in order to see whether the decrease is a real oneor a fabricated one to show effectiveness.

ROE 2008 2009 2010

Cellcom 2.535 3.160 3.785Partner 0.6916 0.5815 1.985

Return on equity measures a company's profitability by revealing how much profit a company generateswith the money shareholders have invested. This ratio is important as every investor wants to achieve thehighest return possible. The reason that Cellcom has such a high ROE is due to a high net income withrespect to low equity; again we return to the high cash reserves held by Cellcom that have assisted theCompany in preventing a issuance of equity in order to raise funds. Partner, on the other hand, has similar(even higher) net income over the past years but Partner maintains high equity due to the recent (2009,2010) authorization of shares.

ROA 2008 2009 2010

Cellcom 0.1802 0.1852 0.2153

Partner 0.2319 0.2029 0.2208

ROA is the most significant ratio for assessing profitability; it shows how a company uses its assets togenerate profit. Partner has had a higher ROA than Cellcom consecutively during the past years.

Although this appears to place Partner as the better user of assets we observe a fluctuating trend over theyears; whereas, Cellcom has maintained an upward trend throughout the same time period. We can expectCellcoms ROA to increase next year but are unable to make the same estimation about Partner. Bothcompanies have been similar at converting their respective investments into profits; however, Partner has

been better over the past years. This may just be due to the fact that Partner has many more employeesthan Cellcom and therefore are able to use their assets more efficiently.

Earnings per share 2008 2009 2010

Cellcom 0.65 0.73 0.99

Partner 0.31 0.43 0.55

The earnings per share ratio show us how much a company allocates their profits for each outstandingshare of common stock. It is generally considered to be the most important determinant in a shares price.

However, as its formula is it is susceptible to accounting manipulations.

Looking at the earnings per share ratio we can see that Cellcom far surpassed Partner in all previousyears. Both companies have been increasing their respective earnings per share. However, Partner had

better growth from 2008 to 2009 (28% compared to 11%) and a similar growth from 2010 to 2009 (22%compared with 26%).

20 http://www.investopedia.com/terms/p/profitmargin.asp#axzz1eK4bDAWv

21Appendix4


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P/E ratio 2008 2009 2010

Cellcom 34 43.917 33.02

Partner 53.22 47.372 36.945

The P/E ratio compares the Companys share prices with its earnings per share. As a rule whencomparing two companies, or comparing a company to its industry a higher P/E ratio is good. However,as the denominator of the ratio is based on accounting measure of earnings it is susceptible tomanipulation. Therefore the ratio is only as good (accurate) as the underlying earnings number.We can see that Cellcom has a steady P/E ratio with a spike in 2009. Partner, on the other hand, has anongoing negative trend in their P/E ratio over the three years. This may be due to the high share price dueto speculation on Cellcoms stock in 2009 due to their increased cash holdings. Such holdings may be an

indicator of impending strategic changes that are about to occur. We know that Cellcom did in factpurchase Netvision in 2011.

Capital Structure Ratios

Debt to Equity Ratio 2008 2009 2010

Cellcom 13.07 16.05 16.58

Partner 1.98 1.86 7.98

The debt to equity ratio tells us how much the company is using debt in order to finance operations. Ahigher ratio indicates that a company has been aggressive in financing its growth with debt. Cellcomsratio is abnormally high for the industry that they are in. Partner maintains a steady ratio around 2 justafter the crisis in 2008 but in 2010 in order to expand Partner issues a lot more debt. This may be anattempt to generate more earnings and expand operations in order to brace the company for the incomingcompetitors due to the changing regulations in the industry.

LTD to T-Assets 2008 2009 2010

Cellcom 0.6514 0.6729 0.6664

Partner 0.3289 0.3105 0.5642

The long term debt to total assets ratio is a measurement representing the percentage of a corporation's

assets that are financed with loans and financial obligations lasting more than one year. The ratio providesa general measure of the financial position of a company, including its ability to meet financialrequirements for outstanding loans. A year-over-year decrease in this metric would suggest the companyis progressively becoming less dependent on debt to grow their business 22. We can see that although itfluctuates slightly Cellcom has maintained a steady ratio for the past few years. In contrast Partner seemsto decline initially jumped by 45% between 2009 and 2010. This complements the debt to equity ratio andteaches us that Partner has taken a lot of long term debt in order to leverage expansion. Cellcom is moreleveraged than Partner. This increases Cellcoms risk as it is more exposed to external market forces(such as interest rate).

Working Capital Activity

Receivable Turnover 2008 2009 2010

Cellcom 4.21 3.94 4.32

Partner 5.54 4.65 4.76

Cellcom has an average of 4.1 whereas as Partner has an average of 5. The ratio shows how effective thecompany is in collecting debt from sales. The higher the ratio the less interest free credit is extended fromthe Company to the customer. Cellcom should consider lowering the amount of accounts receivable inorder to increase their ratio as the money that they are not collecting is not earning for Cellcom. AlthoughPartners ratio also appears low they are doing better than their competitor.

22 http://www.investopedia.com/terms/l/long-term-debt-to-total-assets-ratio.asp#axzz1eSilmRLX


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Accounts Receivable

Days Outstanding Ratio

2008 2009 2010

Cellcom 86.57 92.44 84.48Partner 65.79 78.42 76.68

This ratio shows the amount of time it take the Company to collect the money owed to it from sales doneon credit. On average Partner (73.62) collects its debt quicker than Cellcom (87.83). Money is thelifeblood of any company and in this case Partner is in a much better position than Cellcom. Partner is

more efficient in many ways and this is an example of one of those ways. Partner is simply better atcollecting the money it is owed.

Accounts Payable

Turnover Ratio

2008 2009 2010

Cellcom 2.22 1.94 2.00Partner 2.23 1.96 2.24

The Accounts Payable Turnover Ratio tells how the Company pays off its suppliers. Cellcom and Partnerboth have a ratio of around 2. The low ratio shows off the credit policy that both companies receive fromtheir respective suppliers. Their suppliers are allowing them to extend their payment of payables thusallowing each company to fully utilize their cash.

Inventory Turnover 2008 2009 2010

Cellcom 28.53 22.36 31.94

Partner 30.94 23.86 40.52

The inventory turnover shows us an interesting trend with regards to the industry. The turnover ratiomeasures the number of times inventory is used during a period. We can immediately see that 2009 was aslow year in the industry for both companies. It may have been the changes in regulation regarding

contract cancellation and length of commitment or perhaps a significant part of the consumers werewaiting on a new Apple release before purchasing a new handset.

Asset Turnover Ratio 2008 2009 2010

Cellcom 3.23 2.18 2.57Partner 1.22 1.08 1.18

Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue - the higherthe number the better. It also indicates pricing strategy: companies with low profit margins tend to havehigh asset turnover, while those with high profit margins have low asset turnover23. From the ratios wecan see that Partner has a low asset margin corresponding perfectly with the higher profit margins we sawearlier. On the contrary, Cellcom has a higher asset turnover corresponding with the lower profit marginsseen earlier.

AnalysisAnalyzing only the working capital activity of Cellcom and Partner, it would appear that Partner is

preferable. Partner has a lower receivable turnover and is able to collect its owed money faster thanCellcom. Also, we can learn from the asset turnover that Partner has a high profit margin which in turnincreases profit and retained earnings working to maximize the return for the shareholder.

23 http://www.investopedia.com/terms/a/assetturnover.asp#axzz1eT5uq8fk


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Risk Analysis

Credit risk

What is the probability that Cellcom will not be able to meet its obligations to its creditors or investor?Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financialinstrument fails to meet its contractual obligations, and arises principally from the Company's receivablesfrom customers. Cellcom Management has a credit policy in place and the exposure to credit risk is

monitored on an ongoing basis. The Company conducts credit evaluations on receivables over a certainamount, and requires financial guaranties against them. Management monitors outstanding receivablebalances and the financial statements include appropriate allowances for estimated irrecoverable amounts.The Company is exposed to credit risk arising mainly from its operation in Israel. The Company investsin high ranked (AAA) Israeli government and institutional debt securities. The Companys cash and cashequivalents are maintained with major banking institutions in Israel. At the reporting date, there were nosignificant concentrations of credit risk. The maximum exposure to credit risk is represented by thecarrying amount of each financial asset, including derivatives, in the consolidated statement of financial

position. Financial instruments that could potentially subject the Company to credit risks consist primarilyof trade receivables. Credit risk with respect to these receivables is limited due to the composition of thesubscriber base, which includes a large number of individuals and businesses. The maximum exposure to

credit risk of financial assets at the reporting date by type of counterparty is:

Another way to show Cellcom's Credit Risk is its ICR:

ICR 2008 2009 2010

EBIT/Interest 16.62650602 10.25828 16.11321

This Ratio is used to determine how easily a company can pay interest on outstanding debt. The lower theratio, the more the company is burdened by debt expense. When a company's interest coverage ratio is1.5 or lower, its ability to meet interest expenses may be questionable. An interest coverage ratio below 1indicates the company is not generating sufficient revenues to satisfy interest expenses. We can see theCellcom's ICR is quit high and so the probability not to meet its obligations to creditors is very low.


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Bankruptcy RiskThe common method to estimate a company's bankruptcy risk is using Altman's Z-score24. The Z-score isanalyzed by a multiplication and summation of coefficients and financial ratios, given by the following

equation:

Cellcom 2008 2009 2010

0.050109329 0.141558238 0.088892595

0.072886297 0.062078696 0.060206805

0.084730321 0.079416836 0.096257505

1.615683601 1.966020816 2.014825818

1.169278426 1.016303496 1.111074049

Z-score 3.340310307 3.436455255 3.658545257

Zones of Discrimination:

Z > 3.0 -Safe Zones

1.81 < Z < 3.0 -Grey Zones

Z < 1.81 -Distress Zones

Throughout 2008-2010 Cellcom was within the safe zone. Moreover, the Z-score results have improvedfrom 2008 to 2009 (2.8% improvement) and from 2009 to 2010 (6.46%). By analyzing the ratios, we canidentify two major reasons for the constant growth: the EBIT/TA ratio has grown significantly (21.2%)

between 2009-2010, and is highly counted for in the weighted calculation due to the high coefficient

given by Altman to this ratio (3.3). The reason is that EBIT is carefully observed by creditors since itrepresents the amount of cash that a company will be able to pay off creditors, hence a spotlight indicatorfor possible bankruptcy. Cellcom is deep within the "safe zone". Moreover, the constant increase canassign healthy attributes to the company's security and life-expectancy and an indicator that the companyis performing well on the overall level. Partner's z-scores have sustained a substantial decrease (14.5%)

between 2009 to 2010. The main reason is a significant decrease (30.9%) in the MVE/BVL ratio; if thetrend of z-score decreases continues into 2011, and will drag Partner into the grey zone, the company'ssafety and stability may be in risk.

24http://en.wikipedia.org/wiki/Altman_Z-score

Partner 2008 2009 2010

-0.05072604 -0.01920683 0.000710858

-0.00677832 -0.00807576 -0.13889106

0.311713456 0.081173751 0.088569398

2.74841043 3.235001366 2.233978404

1.220135528 1.081095501 1.186067176

Z-score 3.8479206 3.88272694 3.31752299
http://en.wikipedia.org/wiki/Altman_Z-scorehttp://en.wikipedia.org/wiki/Altman_Z-scorehttp://en.wikipedia.org/wiki/Altman_Z-scorehttp://en.wikipedia.org/wiki/Altman_Z-scorehttp://en.wikipedia.org/wiki/Altman_Z-scorehttp://en.wikipedia.org/wiki/Altman_Z-score


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Company Valuation

WACC CalculationWe assume that the CAPM model holds so we may calculate the appropriate weighted average cost ofcapital (hereinafter: WACC). The WACC will be used to discount the cash flows in the DCF model inorder to calculate the company's value.

Based on P/ETo determine Cellcoms company value based on P/E ratio, we should multiply the overall industry's P/Eratio by Net Income. The average P/E ratio of the industry is 22.6 25.Cellcoms Net Income in 2010 is 1,291,000,000.

Real Price at 31.12.10 = 116 NIS > Estimated Stock Price= 293.33NISWe can see that the real price of the stock today is lower than its Estimated Stock Price. Therefore, thestock price is under-valuated.

DCF Calculation26

We estimated the growth rate by calculating the average growth in gross profit from 2008-2010 to be6.1%.We believe that the gross profit can give us a better estimation of the growth rate than the netincome, because it does not take the temporary loss of impairment on inventory into account.

Our WACC and growth rate are estimated and therefore we calculated the Discounted Cash Flows, for atime period of 3 years, for a pessimistic, expected and optimistic scenarios. In order to use the DCFmodel, we need to know the future cash flows we estimated three pro-forma income statements for eachof the above scenarios. We estimated the three cash flows for each scenario as EBIT*(1-T) discounted bythe WACC in order to get the DCF value. We added these discounted cash flows to the terminal valuewhich was found by using the Gordon model. This table shows the three scenarios.

25http://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=PriceRatios&symbol=CEL

26Appendix 6Full DCF calculations
http://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=PriceRatios&symbol=CELhttp://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=PriceRatios&symbol=CELhttp://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=PriceRatios&symbol=CELhttp://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=PriceRatios&symbol=CELhttp://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=PriceRatios&symbol=CELhttp://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=PriceRatios&symbol=CEL


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Scenario WACC Growth rate DCF(NIS) Terminal Value Company Value

Optimistic 6.1% 5.7% 4,745 443,475 448,220

Estimated 623% 5.15% 4,684 060,83 166,507

Pessimistic 7.27% 4.42% 4,530 59,317 63,839

We found in each of the three scenarios that the current market valuation is undervalued.

Company Valuation summary

The best valuation method is probably some combination on these two methods:Estimated Value = DCF Valuation*80% + P/E Valuation *20% = 139,040.32As we can see according to the estimated value of Cellcom the current market valuation is undervalued.We would advise to buy Cellcom's stock.

Conclusion and Summary

Cellcom is active in a changing environment market after years of stagnation. The future entry of newplayers to the scene along with global technological innovation illustrated by the smartphonephenomenon, have urged Cellcom to take action. In the past, the most important revenue generators werehardware (cellular phone) selling and air time charging. Now days, we notice a trend towards value-addedservices that are enabled by the aforementioned technological innovation. We notice that Cellcomoutperforms its main competitor, Partner, in almost every aspect.

We have witnessed an increase in revenues and gross profit that are indicators for the company's success.Cellcom has increasing ROA figures, and their LTD to TA ratio has stayed constant throughout the years,which indicates stability and corporate control. Moreover, Cellcom is in the "safe zone" from bankruptcy

point of view.

We have found Cellcom to be significantly undervalued and that their stock price does not represent itstrue value. By finding the company's value by the DCF model and by the terminal value, we can say thatCellcom's stock should be bought since we expect future increase in its price.


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Cellcom Israel Ltd. Company Profile,Datamonitor, 29 Sep 2011

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24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-

24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24
http://en.wikipedia.org/wiki/Altman_Z-scorehttp://en.wikipedia.org/wiki/Altman_Z-scorehttp://en.wikipedia.org/wiki/Cellcom_(Israel)http://en.wikipedia.org/wiki/Cellcom_(Israel)http://en.wikipedia.org/wiki/Partner_Communications_Companyhttp://en.wikipedia.org/wiki/Partner_Communications_Companyhttp://he.wikipedia.org/wiki/%D7%AA%D7%A7%D7%A9%D7%95%D7%A8%D7%AA_%D7%91%D7%99%D7%A9%D7%A8%D7%90%D7%9Chttp://he.wikipedia.org/wiki/%D7%AA%D7%A7%D7%A9%D7%95%D7%A8%D7%AA_%D7%91%D7%99%D7%A9%D7%A8%D7%90%D7%9Chttp://he.wikipedia.org/wiki/%D7%AA%D7%A7%D7%A9%D7%95%D7%A8%D7%AA_%D7%91%D7%99%D7%A9%D7%A8%D7%90%D7%9Chttp://he.wikipedia.org/wiki/%D7%AA%D7%A7%D7%A9%D7%95%D7%A8%D7%AA_%D7%91%D7%99%D7%A9%D7%A8%D7%90%D7%9Chttp://he.wikipedia.org/wiki/%D7%AA%D7%A7%D7%A9%D7%95%D7%A8%D7%AA_%D7%91%D7%99%D7%A9%D7%A8%D7%90%D7%9Chttp://investors.ircellcom.co.il/http://investors.ircellcom.co.il/http://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=PriceRatios&symbol=CELhttp://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=PriceRatios&symbol=CELhttp://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=celhttp://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=celhttp://seekingalpha.com/symbol/cel?source=search_general&s=celhttp://seekingalpha.com/symbol/cel?source=search_general&s=celhttp://www.bdicode.co.il/CompanyTextProfile_ENG/568_500_0/Cellcom%20Israel%20Ltdhttp://www.bdicode.co.il/CompanyTextProfile_ENG/568_500_0/Cellcom%20Israel%20Ltdhttp://www.cellcom.co.il/Pages/default.aspxhttp://www.cellcom.co.il/Pages/default.aspxhttp://www.iese.edu/research/pdfs/DI-0912-E.pdfhttp://www.iese.edu/research/pdfs/DI-0912-E.pdfhttp://www.investopedia.com/terms/a/assetturnover.asp#axzz1eT5uq8fkhttp://www.investopedia.com/terms/p/profitmargin.asp#axzz1eK4bDAWvhttp://www.investopedia.com/terms/q/quickratio.asp#axzz1eK4bDAWvhttp://www.investopedia.com/terms/q/quickratio.asp#axzz1eK4bDAWvhttp://www.investopedia.com/university/ratios/cash-flow-indicator/ratio1.asp#axzz1eK4bDAWvhttp://www.investopedia.com/university/ratios/cash-flow-indicator/ratio1.asp#axzz1eK4bDAWvhttp://www.marketwatch.com/investing/stock/cel/profilehttp://www.marketwatch.com/investing/stock/cel/profilehttp://www.moc.gov.il/191-he/MOC.aspxhttp://www.moc.gov.il/191-he/MOC.aspxhttp://www.wikiswot.com/SWOT/4_/Orange.htmlhttp://www.wikiswot.com/SWOT/4_/Orange.htmlhttp://www.wikiwealth.com/research:celhttp://www.wikiwealth.com/research:celhttp://www.ynet.co.il/articles/0,7340,L-4151913,00.htmlhttp://www.ynet.co.il/articles/0,7340,L-4151913,00.htmlhttp://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://ycharts.com/companies/CEL/historical_data/price?p=5&start_month=11&end_date_string=2011-11-24&start_day=24&start_date_string=2006-11-24&end_year=2011&end_date_object=2011-11-24&start_year=2006&start_date_object=2006-11-24&end_month=11&end_day=24http://www.ynet.co.il/articles/0,7340,L-4151913,00.htmlhttp://www.wikiwealth.com/research:celhttp://www.wikiswot.com/SWOT/4_/Orange.htmlhttp://www.moc.gov.il/191-he/MOC.aspxhttp://www.marketwatch.com/investing/stock/cel/profilehttp://www.investopedia.com/university/ratios/cash-flow-indicator/ratio1.asp#axzz1eK4bDAWvhttp://www.investopedia.com/terms/q/quickratio.asp#axzz1eK4bDAWvhttp://www.investopedia.com/terms/p/profitmargin.asp#axzz1eK4bDAWvhttp://www.investopedia.com/terms/a/assetturnover.asp#axzz1eT5uq8fkhttp://www.iese.edu/research/pdfs/DI-0912-E.pdfhttp://www.cellcom.co.il/Pages/default.aspxhttp://www.bdicode.co.il/CompanyTextProfile_ENG/568_500_0/Cellcom%20Israel%20Ltdhttp://seekingalpha.com/symbol/cel?source=search_general&s=celhttp://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=celhttp://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=PriceRatios&symbol=CELhttp://investors.ircellcom.co.il/http://he.wikipedia.org/wiki/%D7%AA%D7%A7%D7%A9%D7%95%D7%A8%D7%AA_%D7%91%D7%99%D7%A9%D7%A8%D7%90%D7%9Chttp://he.wikipedia.org/wiki/%D7%AA%D7%A7%D7%A9%D7%95%D7%A8%D7%AA_%D7%91%D7%99%D7%A9%D7%A8%D7%90%D7%9Chttp://en.wikipedia.org/wiki/Partner_Communications_Companyhttp://en.wikipedia.org/wiki/Cellcom_(Israel)http://en.wikipedia.org/wiki/Altman_Z-score


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Appendix1

Appendix 2

Appendix 3


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Appendix 4

Cellcom ROE27:

Partner ROE28:

27http://ycharts.com/companies/CEL/return_on_equity#startDate=12/31/2008&endDate=12/31/2010&zoom=

28http://ycharts.com/companies/PTNR/return_on_equity#startDate=12/31/2008&endDate=12/31/2010&zoom=


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Appendix 5

Date Close CEL Close ^NYA % CEL % ^NYA Beta

31/12/2010 32.69 7964.02 0.25% 0.15% 0.7379

30/12/2010 32.61 7951.91 1.18% -0.12%

29/12/2010 32.23 7961.48 0.84% 0.38%

28/12/2010 31.96 7931.67 -0.37% 0.14%

27/12/2010 32.08 7920.94 0.50% -0.06%

23/12/2010 31.92 7925.36 0.66% -0.08%

22/12/2010 31.71 7931.76 -0.47% 0.32%

21/12/2010 31.86 7906.1 0.47% 0.75%

20/12/2010 31.71 7846.96 -2.37% 0.15%

17/12/2010 32.48 7835.31 0.37% -0.06%

16/12/2010 32.36 7840.24 -0.49% 0.53%

15/12/2010 32.52 7798.78 -2.17% -0.72%

14/12/2010 33.24 7855.22 -0.27% 0.07%

13/12/2010 33.33 7850.02 -4.88% 0.34%

10/12/2010 35.04 7823.3 0.37% 0.53%

09/12/2010 34.91 7782.14 0.06% 0.41%

08/12/2010 34.89 7750.32 0.35% 0.14%

07/12/2010 34.77 7739.64 -0.23% -0.01%

06/12/2010 34.85 7740.69 0.90% -0.14%

03/12/2010 34.54 7751.58 1.17% 0.51%

02/12/2010 34.14 7712.25 1.46% 1.43%

01/12/2010 33.65 7603.73 0.90% 2.33%

30/11/2010 33.35 7430.94 -0.63% -0.70%

29/11/2010 33.56 7483.34 -1.47% -0.23%

26/11/2010 34.06 7500.54 -0.55% -1.04%

24/11/2010 34.25 7579.26 1.33% 1.45%

23/11/2010 33.8 7470.77 -2.87% -1.83%

22/11/2010 34.8 7610.3 1.28% -0.40%

19/11/2010 34.36 7641.08 0.38% 0.28%

18/11/2010 34.23 7619.94 1.75% 1.75%

17/11/2010 33.64 7488.76 2.22% 0.22%

16/11/2010 32.91 7472.63 -2.00% -1.90%

15/11/2010 33.58 7617.51 0.57% -0.08%

12/11/2010 33.39 7623.24 -0.83% -1.29%

11/11/2010 33.67 7723.24 -0.88% -0.31%

10/11/2010 33.97 7747.46 2.10% 0.59%

09/11/2010 33.27 7702.31 -0.09% -1.03%

08/11/2010 33.3 7782.2 1.06% -0.24%

05/11/2010 32.95 7800.66 -0.60% 0.23%

04/11/2010 33.15 7782.43 0.03% 2.29%

03/11/2010 33.14 7608.41 0.91% 0.35%

02/11/2010 32.84 7582.14 -2.00% 0.97%

01/11/2010 33.51 7509.21 -0.83% -0.06%


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29/10/2010 33.79 7513.35 -0.71% 0.11%

28/10/2010 34.03 7504.85 2.22% 0.32%

27/10/2010 33.29 7480.87 -0.63% -0.66%

26/10/2010 33.5 7530.8 -1.12% -0.21%

25/10/2010 33.88 7546.38 1.41% 0.31%

22/10/2010 33.41 7522.91 0.63% 0.10%

21/10/2010 33.2 7515.67 2.37% -0.11%

20/10/2010 32.43 7523.81 0.84% 1.35%

19/10/2010 32.16 7423.65 -0.68% -1.95%

18/10/2010 32.38 7571.1 0.15% 0.67%

15/10/2010 32.33 7520.6 0.37% -0.34%

14/10/2010 32.21 7546.59 0.72% -0.20%

13/10/2010 31.98 7561.5 1.11% 0.96%

12/10/2010 31.63 7489.62 -0.35% 0.14%

11/10/2010 31.74 7479.01 0.86% 0.01%

08/10/2010 31.47 7478.42 0.48% 0.72%

07/10/2010 31.32 7425.01 -0.70% -0.31%

06/10/2010 31.54 7448.33 0.06% 0.19%

05/10/2010 31.52 7434.18 2.40% 2.22%

04/10/2010 30.78 7272.53 0.52% -0.86%

01/10/2010 30.62 7335.91 0.82% 0.75%

30/09/2010 30.37 7281.07 0.70% -0.25%

29/09/2010 30.16 7299.31 0.33% -0.15%

28/09/2010 30.06 7310.32 0.23% 0.65%

27/09/2010 29.99 7263.37 1.56% -0.52%

24/09/2010 29.53 7301.04 1.06% 2.23%

23/09/2010 29.22 7141.51 0.07% -0.96%

22/09/2010 29.2 7210.85 -0.48% -0.48%

21/09/2010 29.34 7245.95 1.84% -0.28%

20/09/2010 28.81 7266.02 0.73% 1.56%

17/09/2010 28.6 7154.65 -0.07% -0.21%

16/09/2010 28.62 7169.48 -2.82% -0.14%

15/09/2010 29.45 7179.79 1.52% 0.25%

14/09/2010 29.01 7162.08 0.21% 0.08%

13/09/2010 28.95 7156.18 1.83% 1.25%

10/09/2010 28.43 7067.51 0.42% 0.47%

09/09/2010 28.31 7034.37 0.39% 0.49%

08/09/2010 28.2 6999.94 0.82% 0.57%

07/09/2010 27.97 6959.94 1.75% -1.35%

03/09/2010 27.49 7055.03 0.88% 1.27%

02/09/2010 27.25 6966.25 -0.91% 0.80%

01/09/2010 27.5 6910.98 0.22% 3.09%

31/08/2010 27.44 6704.15 -2.21% 0.13%

30/08/2010 28.06 6695.28 -1.16% -1.47%

27/08/2010 28.39 6794.91 2.38% 1.95%

26/08/2010 27.73 6665.26 -1.77% -0.46%

25/08/2010 28.23 6696.12 -0.91% 0.23%

24/08/2010 28.49 6681.03 -1.55% -1.53%


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23/08/2010 28.94 6784.97 0.24% -0.41%

20/08/2010 28.87 6813.15 -0.69% -0.54%

19/08/2010 29.07 6850.45 -0.68% -1.69%

18/08/2010 29.27 6968.08 0.17% 0.12%

17/08/2010 29.22 6959.79 0.59% 1.28%

16/08/2010 29.05 6871.58 1.86% 0.15%

13/08/2010 28.52 6861.04 -0.63% -0.30%

12/08/2010 28.7 6881.94 1.23% -0.30%

11/08/2010 28.35 6902.71 -2.38% -3.32%

10/08/2010 29.04 7139.75 -1.09% -0.68%

09/08/2010 29.36 7188.3 1.73% 0.48%

06/08/2010 28.86 7153.72 0.38% -0.29%

05/08/2010 28.75 7174.27 1.45% -0.11%

04/08/2010 28.34 7182.14 1.14% 0.49%

03/08/2010 28.02 7146.99 -0.81% -0.39%

02/08/2010 28.25 7174.9 2.36% 2.51%

30/07/2010 27.6 6998.99 0.33% 0.06%

29/07/2010 27.51 6994.57 0.73% -0.07%

28/07/2010 27.31 6999.18 0.40% -0.65%

27/07/2010 27.2 7044.99 -0.73% -0.01%

26/07/2010 27.4 7046 2.05% 1.16%

23/07/2010 26.85 6965.11 1.02% 0.92%

22/07/2010 26.58 6901.91 1.96% 2.54%

21/07/2010 26.07 6731.16 1.05% -1.30%

20/07/2010 25.8 6820.04 0.82% 1.19%

19/07/2010 25.59 6739.64 0.04% 0.45%

16/07/2010 25.58 6709.51 -1.04% -3.00%

15/07/2010 25.85 6916.81 -1.34% 0.19%

14/07/2010 26.2 6903.36 -0.57% -0.06%

13/07/2010 26.35 6907.78 2.33% 1.67%

12/07/2010 25.75 6794.48 -0.46% -0.21%

09/07/2010 25.87 6808.71 0.54% 0.78%

08/07/2010 25.73 6755.81 1.74% 1.05%

07/07/2010 25.29 6685.78 0.68% 3.08%

06/07/2010 25.12 6486.09 0.28% 0.80%

02/07/2010 25.05 6434.81 0.48% -0.42%

01/07/2010 24.93 6462.03 -0.28% -0.12%

30/06/2010 25 6469.65 -1.30% -0.77%

29/06/2010 25.33 6520.09 -3.98% -3.21%

28/06/2010 26.38 6736.6 -3.01% -0.40%

25/06/2010 27.2 6763.93 1.08% 0.50%

24/06/2010 26.91 6730.24 -2.43% -1.75%

23/06/2010 27.58 6850.05 -0.18% -0.13%

22/06/2010 27.63 6858.95 0.40% -1.72%

21/06/2010 27.52 6978.86 1.25% -0.13%

18/06/2010 27.18 6988.25 0.59% 0.09%

17/06/2010 27.02 6982.04 -0.52% 0.09%

16/06/2010 27.16 6976.08 -1.27% -0.20%


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15/06/2010 27.51 6989.88 1.18% 2.52%

14/06/2010 27.19 6817.97 2.99% 0.05%

11/06/2010 26.4 6814.76 0.49% 0.46%

10/06/2010 26.27 6783.51 1.35% 3.41%

09/06/2010 25.92 6559.71 -0.42% -0.55%

08/06/2010 26.03 6596.12 1.28% 1.29%

07/06/2010 25.7 6512.42 0.43% -1.33%

04/06/2010 25.59 6600.27 -2.33% -3.79%

03/06/2010 26.2 6860.39 0.08% 0.30%

02/06/2010 26.18 6839.61 3.89% 2.68%

01/06/2010 25.2 6661.1 -6.39% -1.92%

28/05/2010 26.92 6791.57 -1.46% -1.48%

27/05/2010 27.32 6893.29 4.67% 3.95%

26/05/2010 26.1 6631.36 -0.27% -0.52%

25/05/2010 26.17 6665.83 -4.52% -0.01%

24/05/2010 27.41 6666.74 0.00% -1.60%

21/05/2010 27.41 6775.45 0.44% 1.84%

20/05/2010 27.29 6653 -3.23% -3.96%

19/05/2010 28.2 6927.21 0.43% -0.46%

18/05/2010 28.08 6959.21 -1.96% -1.48%

17/05/2010 28.64 7063.83 1.85% -0.20%

14/05/2010 28.12 7077.64 -1.26% -2.17%

13/05/2010 28.48 7234.37 -0.80% -1.12%

12/05/2010 28.71 7316.36 0.10% 1.31%

11/05/2010 28.68 7221.66 -0.93% -0.50%

10/05/2010 28.95 7257.62 6.47% 4.94%

07/05/2010 27.19 6916.18 -2.09% -1.37%

06/05/2010 27.77 7011.92 -3.14% -3.39%

05/05/2010 28.67 7258.02 -0.62% -1.08%

04/05/2010 28.85 7337.25 -6.27% -2.73%

03/05/2010 30.78 7543.12 1.58% 0.92%

30/04/2010 30.3 7474.4 -0.69% -1.51%

29/04/2010 30.51 7589.29 -1.64% 1.19%

28/04/2010 31.02 7499.72 -1.05% 0.49%

27/04/2010 31.35 7463.09 -2.43% -2.79%

26/04/2010 32.13 7677.65 -2.81% -0.31%

23/04/2010 33.06 7701.61 0.92% 0.77%

22/04/2010 32.76 7642.83 -1.47% -0.02%

21/04/2010 33.25 7644.67 -0.12% -0.32%

20/04/2010 33.29 7669.11 0.15% 0.96%

19/04/2010 33.24 7596.56 -1.74% 0.16%

16/04/2010 33.83 7584.62 -1.02% -1.75%

15/04/2010 34.18 7719.66 -0.41% -0.12%

14/04/2010 34.32 7728.96 -0.81% 1.19%

13/04/2010 34.6 7638.35 0.76% -0.04%

12/04/2010 34.34 7641.75 0.56% 0.17%

09/04/2010 34.15 7629.05 0.62% 0.84%

08/04/2010 33.94 7565.33 -0.88% 0.25%


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7

07/04/2010 34.24 7546.18 -1.27% -0.77%

06/04/2010 34.68 7604.44 -0.06% 0.05%

05/04/2010 34.7 7600.93 1.17% 0.82%

01/04/2010 34.3 7539.02 0.38% 1.22%

31/03/2010 34.17 7447.8 -0.61% -0.17%

30/03/2010 34.38 7460.72 0.97% -0.06%

29/03/2010 34.05 7464.9 1.34% 0.83%

26/03/2010 33.6 7403.58 -0.03% 0.24%

25/03/2010 33.61 7385.6 -1.09% -0.30%

24/03/2010 33.98 7408.16 -0.64% -0.95%

23/03/2010 34.2 7478.86 -0.70% 0.81%

22/03/2010 34.44 7419.02 0.09% 0.44%

19/03/2010 34.41 7386.85 -1.04% -0.76%

18/03/2010 34.77 7443.57 0.20% -0.41%

17/03/2010 34.7 7474.13 0.49% 0.64%

16/03/2010 34.53 7426.7 -0.43% 1.03%

15/03/2010 34.68 7350.96 0.43% -0.16%

12/03/2010 34.53 7362.85 0.64% 0.13%

11/03/2010 34.31 7353.24 -3.22% 0.35%

10/03/2010 35.45 7327.67 -0.14% 0.46%

09/03/2010 35.5 7294.02 -0.50% 0.02%

08/03/2010 35.68 7292.53 2.09% 0.02%

05/03/2010 34.95 7291.31 0.58% 1.65%

04/03/2010 34.75 7173.07 -0.11% 0.12%

03/03/2010 34.79 7164.66 2.84% 0.40%

02/03/2010 33.83 7135.97 -1.69% 0.50%

01/03/2010 34.41 7100.75 0.97% 0.93%

26/02/2010 34.08 7035.04 0.06% 0.31%

25/02/2010 34.06 7013.45 0.53% -0.24%

24/02/2010 33.88 7030.67 0.74% 0.80%

23/02/2010 33.63 6974.6 0.57% -1.47%

22/02/2010 33.44 7078.53 -1.18% -0.07%

19/02/2010 33.84 7083.25 -0.38% 0.04%

18/02/2010 33.97 7080.38 -0.82% 0.64%

17/02/2010 34.25 7035.2 1.75% 0.31%

16/02/2010 33.66 7013.35 0.84% 2.02%

12/02/2010 33.38 6874.56 0.33% -0.35%

11/02/2010 33.27 6898.72 2.06% 1.17%

10/02/2010 32.6 6819.12 0.15% -0.23%

09/02/2010 32.55 6835.16 1.31% 1.81%

08/02/2010 32.13 6713.87 0.44% -1.02%

05/02/2010 31.99 6782.75 -0.53% -0.08%

04/02/2010 32.16 6787.86 -1.38% -3.62%

03/02/2010 32.61 7042.62 -0.15% -0.83%

02/02/2010 32.66 7101.44 1.71% 1.33%

01/02/2010 32.11 7008.23 0.12% 1.81%

29/01/2010 32.07 6883.78 -0.40% -1.05%

28/01/2010 32.2 6956.99 0.88% -1.12%


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8

27/01/2010 31.92 7035.61 -0.62% 0.10%

26/01/2010 32.12 7028.32 -0.71% -0.63%

25/01/2010 32.35 7073.13 -0.31% 0.60%

22/01/2010 32.45 7030.61 -1.58% -2.01%

21/01/2010 32.97 7174.46 -0.27% -2.12%

20/01/2010 33.06 7329.83 -0.93% -1.53%

19/01/2010 33.37 7443.68 2.84% 1.18%

15/01/2010 32.45 7356.79 -0.31% -1.23%

14/01/2010 32.55 7448.52 -0.46% 0.25%

13/01/2010 32.7 7430.14 1.24% 0.81%

12/01/2010 32.3 7370.45 -1.28% -1.06%

11/01/2010 32.72 7449.05 -0.88% 0.32%

08/01/2010 33.01 7425.35 0.95% 0.42%

07/01/2010 32.7 7393.93 -0.79% 0.22%

06/01/2010 32.96 7377.7 0.12% 0.31%

05/01/2010 32.92 7354.87 0.27% 0.38%

04/01/2010 32.83 7326.74


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Appendix 6

NIS millions Pro forma Est. Pro forma Optimistic Pro forma Pessimistic

2,010 2,011 2,012 2,013 2,011 2,012 2,013 2,011 2,012 2,013

Revenues 6,6620 7,005.155 7,365.985 7,745.402 7,041.734 7,443.113 7,867.370 6,956.133 7,263.252 7,583.90

Cost of revenues 3,3220 3,493.114 3,673.042 3,862.237 3,511.354 3,711.501 3,923.057 3,468.669 3,621.814 3,781.70

Gross profit 3,3400 3,512.041 3,692.944 3,883.165 3,530.380 3,731.612 3,944.314 3,487.464 3,641.438 3,802.20

Selling andmarketingexpenses

756.00 794.941 835.888 878.944 799.092 844.640 892.785 789.378 824.230 860.620

General andadministrative

expenses

641.00 674.017 708.736 745.242 677.537 716.157 756.978 669.301 698.851 729.706

Other (income)expenses, net

5.000 5.258 5.528 5.813 5.285 5.586 5.905 5.221 5.451 5.692

Operating income 1,9380 2,037.825 2,142.792 2,253.166 2,048.466 2,165.229 2,288.647 2,023.564 2,112.906 2,206.193

Financing income 106.00 111.460 117.201 123.238 112.042 118.428 125.179 110.680 115.567 120.669

Financingexpenses

-336.0 -353.307 -371.506 -390.642 -355.152 -375.396 -396.793 -350.835 -366.324 -382.498

Financingexpenses, net

-230.0 -241.847 -254.305 -267.404 -243.110 -256.967 -271.614 -240.155 -250.758 -261.829

Income beforeincome tax (EBT)

1,7080 1,795.978 1,888.487 1,985.762 1,805.356 1,908.261 2,017.032 1,783.410 1,862.149 1,944.364

Income tax 417.00 438.479 461.065 484.814 440.769 465.893 492.449 435.411 454.635 474.707

Net income 1,2910 1,357.498 1,427.422 1,500.948 1,364.587 1,442.368 1,524.583 1,347.999 1,407.514 1,469.657

EBIT(EBT+Income

Tax)

2,1250 2,234.457 2,349.552 2,470.576 2,246.125 2,374.154 2,509.481 2,218.820 2,316.783 2,419.071

Tax 25% - [1-0.25=0.75]

0.750 0.750 0.750 0.750 0.750 0.750 0.750 0.750 0.750 0.750

Free Cash Flow(EBIT*(1-tax

rate))

1,5930 1,675.843 1,762.164 1,852.932 1,684.594 1,780.616 1,882.111 1,664.115 1,737.587 1,814.303

DCF = FreeCF/(1+WACC)^

1,577.578 1,561.571 1,545.726 1,587.742 1,581.756 1,575.792 1,551.377 1,510.131 1,469.982

Terminal Value

CF3/(WACC-g)^1

171,902.76 470,527.67 63,617.8

Terminal ValuePV

161,823.094

443,475.656

59,307.927

DCF Valuation 4,684.875 4,745.290 4,531.490

Company Valuation

(DCF+Terminal Value PV)

166,507.96 448,220.94 63,839.41

Cellcom Statement Analysis

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